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Jakarta Post

Tax amnesty will attract part of US$867.25b: Minister

  • thejakartapost.com

    The Jakarta Post

Jakarta   /   Tue, April 5, 2016   /  09:29 pm
 Tax amnesty will attract part of US$867.25b: Minister Ready: Lawmakers attend a session at the House of Representatives building. House Speaker Ade Komarudin said the House would finish deliberating the tax amnesty bill after it reconvenes on April 6. (Tempo/-)

Finance Minister Bambang Brodjonegoro says the passing of the tax amnesty bill into law is expected to attract some of the more than Rp 11.4 quadrillion (US$ 867.25 billion) in assets owned by Indonesians parked in foreign countries back to the country.

"Now, our GDP is Rp 11.4 quadrillion. Based on our estimated calculation, the potential of Indonesians funds parked overseas is more than our GDP," Bambang said on Tuesday.

"Indonesians have their favorite tax havens. First, the British Virgin Islands. Second, the Cook Islands. The third is Singapore. However, it doesn't mean that they keep the money in those tax havens. The money is kept in banks in countries in which we have already obtained some of the data," he added.

Information was collected by government intelligence agents from 1995-2014, but some of the money has been parked overseas in US dollars since the 1970s, he said, adding that the weakening of the rupiah from time to time had multiplied its value.

The information explained why the loan-to-GDP ratio of Singapore could stand at 200 percent, while Indonesia’s was only 30 percent, the minister said. "It means Indonesian funds are in Singapore," Bambang said.

On Monday, the International Consortium of Investigative Journalists (ICIJ) published a report of 11 million confidential documents leaked from Panama-based law firm Mossack Fonseca that shows how the firm helped clients from all over the world launder money and avoid paying taxes.

Wealthy Indonesians are among big names mentioned in the documents, such as Sandiaga Uno, one of the candidates for the 2017 Jakarta gubernatorial election, and two people suspected of corrupt practices: Muhammad Riza Chalid and Djoko Soegiarto Tjandra.

At least 800 businessmen or politicians from the country are named in the Panama Papers. "We will study the information in the Panama Papers further as our own data is limited to some banks and countries," Bambang said.

Meanwhile, the House of Representatives will deliberate the tax amnesty bill after it reconvenes this month, paving the way for fund repatriation by wealthy Indonesians.

The law will pardon tax evaders and levy only 1 to 6 percent on repatriated assets and unreported domestic assets.

Revenue from the penalties is expected to reach Rp 100 trillion to Rp 200 trillion. It is thought that this figure will be almost sufficient to plug this year's estimated Rp 290 trillion budget deficit.

However, Development of Economics and Finance (INDEF) researcher Iman Sugema said on Tuesday that a tax amnesty would not be enough to encourage tax evaders to repatriate their funds. Hence, the government should build a better domestic environment for investment, he said.

"If you are corrupt, what would you do after repatriating your funds to Indonesia? You’d want to invest. But if the investment environment was not good, you would try to find ways to park the money overseas once again," Iman said.

"The government needs to find a strategy to keep the money in the country for a long time," Iman added. (vps/bbn)

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